The Government's homebuying schemes explained

Struggling to get a foot on (or up) the property ladder? Here's our simple round-up of government schemes that could provide just the boost you need.

Being a first-time buyer can often mean paying rent, saving for a deposit and keeping up with house prices all at the same time – no easy feat.

But there's good news too.

As well as a stamp duty break on the first £300,000 of all homes worth up to £500,000, the Government offers a range of homebuying schemes aimed at first-time buyers, as well as existing homeowners looking to move up the ladder.

Here's a round-up of each scheme and how it works.

Help to Buy

Help to Buy offers a boost to first-time buyers and home movers who can only raise a 5% deposit.

When Help to Buy was launched back in 2013, there were two parts to the scheme; Equity Loan and Mortgage Guarantee.

As scheduled, the Mortgage Guarantee (where the Government offered a guarantee to mortgage lenders to encourage larger loans) was scrapped at the end of 2016.

Help to Buy Equity Loan

Help to Buy Equity Loan is the only arm of Help to Buy that is still available.

The scheme requires you put down a minimum 5% deposit of the property value, with the Government offering an interest-free loan of a further 20%.

The remaining 75% is covered by a standard mortgage.

Help to Buy mortgages are offered by most major lenders including Santander, Barclays and Halifax, as well as some smaller building societies such as Teachers and Newbury.

For example, on a £200,000 property, you'd need a minimum deposit of £10,000 and the means to qualify for a mortgage of £150,000. The Government would then plug the gap with an equity loan of £40,000.

How the equity loan works

There is no interest to pay for the first 5 years

In year 6, interest (known as a 'loan fee') kicks in at 1.75%

The rate increases every year thereafter at the RPI (retail prices index) measure of inflation plus 1%

You can choose to pay interest in a single annual payment or by monthly direct debit. But, either way, these payments are 'fees only' will NOT go towards paying off the equity loan.

The idea with the Help to Buy Equity Loan is that, because you're theoretically only borrowing 75% from the mortgage lender, interest rates will be cheaper than on a standard 95% mortgage.

However, don't assume this is always the case. Make sure you compare mortgage deals, either on a comparison website or using a broker, first.

Repaying the equity loan

The Government will take back its 20% share of your home, whether that's at a profit or loss, either when you sell or at the end of the 25-year mortgage term if you decide to stay.

You can opt to repay the loan before this but only in minimum 10% increments of the property's current market value. This is known as staircasing.

The Help to Buy Equity Loan scheme is only available on new-build properties in England worth up to £600,000.

The scheme will remain open until March 2021.

Help to Buy (Wales) also offers a government equity loan worth up to 20%. It applies to new-build properties up to a maximum value of £300,000. The scheme closes in March 2021.

Scotland's Help to Buy, known as the Affordable New Build Scheme, offers a government equity loan worth up to 15% which always remains interest-free. The scheme applies to new-build properties up to a maximum value of £200,000 and closes in March 2021.

The Government has confirmed that a new Help to Buy scheme will launch in April 2021 when the current scheme closes, and will run for two years.

However, this will be limited to first-time buyers only and price caps will be regional.

Help to Buy London

Help to Buy London is a extension of the Help to Buy Equity Loan. It's aimed people with a 5% deposit who want to buy in London and Greater London where house prices are typically much higher than the UK average.

To reflect this, Help to Buy London offers an equity loan of up to 40%, compared to 20% in England and Wales and 15% in Scotland.

The loan is interest-free for the first five years and, again, the scheme is only available on qualifying new-build homes.

Help to Buy ISA

A Help to Buy ISA is designed to boost first-time buyers' savings pots.

For every £200 you save into the account, the Government will add £50. This is up to a maximum bonus of £3,000 (which would apply to £12,000 of savings).

Stamp duty

Finally, don't forget to factor in stamp duty which is payable on all primary homes worth over £125,000.

However, if you (and any other joint buyer/s) are non-homeowners and have never owned or part-owned a home previously (in any part of the world), the first £300,000 is exempt from stamp duty, up to a maximum value of £500,000.

This means if the home costs £300,000 your stamp duty bill will be zero. If it costs £500,000, your stamp duty bill be be £10,000, opposed to the previous £15,000. The maximum saving available is therefore £5,000.